Rouse v. Hennepin County
Filing
63
MEMORANDUM OPINION AND ORDER. Defendants' Motion for Judgment on the Pleadings (Doc. No. 41 ) is DENIED. (Written Opinion). Signed by Judge Donovan W. Frank on 5/13/2013. (BJS)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Kevin W. Rouse, Emily M.
Rouse, and Brian L. Ranwick,
on behalf of themselves and all
others similarly situated,
Civil No. 12-326 (DWF/SER)
Plaintiffs,
v.
MEMORANDUM
OPINION AND ORDER
Hennepin County,
Defendant.
United States of America,
Intervenor,
Hennepin County,
Third-Party Plaintiff,
v.
Quadrant Systems, LLC,
Third-Party Defendant.
Thomas J. Lyons, Esq., Lyons Law Firm, P.A., and Thomas J. Lyons, Jr., Esq., Consumer
Justice Center P.A., counsel for Plaintiffs.
Michael O. Freeman, Hennepin County Attorney, and Rebecca Lee Stark Holschuh,
Assistant Hennepin County Attorney, Hennepin County Attorney’s Office, counsel for
Defendant Hennepin County.
Gerald C. Kell, Esq., U.S. Department of Justice, counsel for Intervenor United States of
America.
INTRODUCTION
This matter is before the Court on a Motion for Judgment on the Pleadings brought
by Defendant Hennepin County (“Defendant”) (Doc. No. 41). For the reasons set forth
below, the Court denies the motion.
BACKGROUND
Defendant’s Taxpayer Services Department is organized into several divisions,
including the “service centers division,” which is the relevant division in this lawsuit.
Plaintiffs allege that Defendant violated provisions of the Fair Credit Reporting Act
(“FCRA”), 15 U.S.C. § 1681, et seq., and the Fair and Accurate Credit Transactions Act
(“FACTA”), which amended the FCRA, by issuing receipts bearing full, unredacted
credit card expiration dates. (See generally Doc. No. 2, Am. Compl. ¶¶ 19-25.) 1
Specifically with respect to the named Plaintiffs, the Second Amended Complaint alleges
that on separate occasions between the dates of March 16, 2011 and February 1, 2012,
Plaintiff Kevin Rouse purchased a Notary Registration, paid a sales tax for an
automobile, purchased a driver’s license, purchased lien notices for three cars, and
purchased license tabs from Defendant; that Plaintiff Kevin Rouse used his MasterCard
credit card to pay for these purchases; and that Defendant provided receipts with an
un-redacted expiration date. (Id. ¶¶ 34-37.) In addition, on December 16, 2011, Plaintiff
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FACTA amended the FCRA to require that merchants redact customers’ credit
card numbers and expiration dates on receipts provided to consumers. 15 U.S.C.
§ 1681c(g).
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Emily M. Rouse purchased a passport from Defendant, used her Visa credit card to pay,
and Defendant provided a receipt with an un-redacted expiration date. (Id. ¶ 38.)
Finally, on February 9, 2012, Plaintiff Brian L. Ranwick purchased photos from
Defendant, used his Master Card credit card to pay, and Defendant provided a receipt
with an un-redacted expiration date. (Id. ¶ 40.)
After filing the Amended Complaint in February 2012, Plaintiffs served
third-party subpoenas to credit card companies and technology vendors. (Doc. No. 51,
Lyons Decl. ¶¶ 2-8.) Defendant filed the present motion for judgment on the pleadings
on January 11, 2013, seeking dismissal of Plaintiffs’ Amended Complaint. (Doc. No.
41.) On February 1, 2013, the parties submitted a Stipulation to Amend Plaintiffs’
Amended Class Action Complaint. (Doc. No. 48.) Pursuant to the stipulation, Plaintiffs
were permitted to file the Second Amended Class Action Complaint. (Doc. No. 52.) In
the Second Amended Class Action Complaint, Plaintiffs again claimed that Defendant’s
issuance of credit card receipts containing expiration dates constitutes a willful violation
of the FCRA and FACTA. (Second Am. Compl. ¶¶ 17-33, 51-59.) Plaintiffs also seek to
represent a class of similarly situated individuals. (Id. ¶¶ 43-50.)
DISCUSSION
I.
Legal Standard
A party may move for judgment on the pleadings at any point after the close of
pleadings but early enough to avoid a delay of trial. Fed. R. Civ. P. 12(c). A court
evaluates a motion for judgment on the pleadings under the same standard as a motion
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brought under Rule 12(b)(6). See Ashley County v. Pfizer, 552 F.3d 659, 665 (8th Cir.
2009); Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir. 1990).
In deciding a motion to dismiss pursuant to Rule 12(b)(6), a court assumes all
facts in the complaint to be true and construes all reasonable inferences from those facts
in the light most favorable to the complainant. Morton v. Becker, 793 F.2d 185, 187 (8th
Cir. 1986). In doing so, however, a court need not accept as true wholly conclusory
allegations, Hanten v. Sch. Dist. of Riverview Gardens, 183 F.3d 799, 805 (8th Cir.
1999), or legal conclusions drawn by the pleader from the facts alleged. Westcott, 901
F.2d at 1488. A court may consider the complaint, matters of public record, orders,
materials embraced by the complaint, and exhibits attached to the complaint in deciding a
motion to dismiss under Rule 12(b)(6). Porous Media Corp. v. Pall Corp., 186 F.3d
1077, 1079 (8th Cir. 1999).
To survive a motion to dismiss, a complaint must contain “enough facts to state a
claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
545 (2007). Although a complaint need not contain “detailed factual allegations,” it must
contain facts with enough specificity “to raise a right to relief above the speculative
level.” Id. at 555. As the United States Supreme Court recently reiterated, “[t]hreadbare
recitals of the elements of a cause of action, supported by mere conclusory statements,”
will not pass muster under Twombly. Ashcroft v. Iqbal, 550 U.S. 544, 678 (2009) (citing
Twombly, 550 U.S. at 555). In sum, this standard “calls for enough fact[s] to raise a
reasonable expectation that discovery will reveal evidence of [the claim].” Twombly, 550
U.S. at 556.
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II.
Defendant’s Motion
Defendant moves for judgment on the pleadings on three separate grounds:
(1) Plaintiffs have failed to adequately allege willfulness and, therefore, fail to state a
claim for relief; (2) Defendant could not have acted willfully as a matter of law; and
(3) Defendant is entitled to Eleventh Amendment immunity as an arm of the State. The
Court addresses each argument below.
A.
Willfulness
There is no dispute that the FCRA prohibits a merchant from including credit card
expiration dates on customer receipts: “[N]o person that accepts credit cards or debit
cards for the transaction of business shall print more than the last 5 digits of the card
number or the expiration date upon any receipt provided to the cardholder at the point of
the sale or transaction.” 15 U.S.C. § 1681c(g). “[P]erson means any individual,
partnership, corporation, trust, estate, cooperative, association, government or
governmental subdivision or agency, or other entity.” 15 U.S.C. § 1681a(b). Plaintiffs
allege that Defendant willfully violated the FCRA when it intentionally printed and
provided its customers with credit card receipts that included the expiration date.
(Second Am. Compl. ¶ 17.)
The significance of a claim of willful noncompliance is that the consumer need not
prove actual damages. See 15 U.S.C. § 1681n (imposing civil liability of either actual
damages or statutory damages of $100 to $1,000 for willful violations of the FCRA).
The Supreme Court has made it clear that “willfulness” under the FCRA requires a
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knowing or a reckless violation of the statute’s requirements. Safeco Ins. Co. of Am. v.
Burr, 551 U.S. 47 (2007).
Defendant submits that the Second Amended Complaint fails to sufficiently allege
willfulness. Specifically, Defendant claims that Plaintiffs’ allegations of willfulness are
conclusory and fall into the category of “attendant publicity” that is not tied to
Defendant’s conduct. (Doc. No. 53 at 4, citing Zaun v. J.S.H. Inc. of Faribault, Civ. No.
10-2190, 2010 WL 3862860, at *3 (D. Minn. Sept. 28, 2010).)
The Court disagrees and finds that Plaintiffs have sufficiently stated a claim for a
willful violation. Plaintiffs have alleged that Defendant’s credit card processing partners
sent Defendant at least eight communications instructing Defendant to comply with
FACTA, specifically advising Defendant that printing credit card expiration dates on
customer receipts was against the law. (Second Am. Compl. ¶¶ 17-33.) Taking the
allegations in Plaintiffs’ Second Amended Complaint as true, and construing all
reasonable inferences from those facts in the light most favorable to Plaintiffs, a
fact-finder could reasonably conclude that Defendant was aware of the requirements of
the FACTA as it pertains to the printing of expiration dates and that Defendant had the
ability to redact the expiration dates and ensure compliance with the law. Moreover,
Plaintiffs allege that Defendant disregarded the communications and continued to print
credit card receipts with unredacted expiration dates. These allegations are sufficient to
plausibly state a willful violation claim.
Defendant also argues that it could not have willfully violated the FCRA as a
matter of law because it is objectively reasonable, under the law, to interpret the FCRA’s
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damages provisions as being inapplicable to government entities. Defendant submits that
under the standards set forth in Safeco, a reasonable interpretation of the law is sufficient
to negate the claim of willfulness, and further that it could have reasonably interpreted
that it did not meet the definition of “person” under the FCRA. Defendant argues that the
FCRA provisions at issue here are unclear and complicated and that the definition of
“person” differs from provision to provision. Defendant further submits that the FCRA’s
use of “person” in both its criminal and civil liability provisions suggests that the term
“person” is context-dependent, and that the federal government, in other cases, has
argued that the history and structure of the FCRA demonstrate that Congress did not
intend the term “person” to include the United States in the context of civil-remedies
provisions. (Doc. No. 43 at 23-24.)
Plaintiffs assert that Defendant’s argument is particular to the question of whether
the United States has waived sovereign immunity from suit, and that this argument
involves a different statutory interpretation, one that involves an inquiry into whether
Congress unequivocally consented to suit against the United States when amending the
FCRA beyond its original regulation of consumer reporting agencies. Plaintiffs further
submit that because Defendant is not the United States, the issue of sovereign immunity
does not apply and ordinary statutory interpretation governs, under which Defendant can
be liable for damages for violating legal duties codified within the FCRA. In particular,
Plaintiffs point out that a “consumer reporting agency” as originally defined by the
FCRA included “any person,” and that any “person” included any “government.” (Doc.
No. 56 at 7, citing Pub. L. 91-508, Title VI, §§ 603(b), (f), Oct. 26, 1970).)
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At this early stage of the litigation, the Court agrees with Plaintiffs’ position on
this point. The relevant statutory text of the FCRA reveals that a “person” under the
statute includes any “government or governmental subdivision or agency,” and therefore
that a government can be liable under the statue. Thus, it appears that Defendant’s
interpretation of the statute to mean that no government can be subject to damages under
its provisions is not reasonable. 2
B.
Eleventh Amendment Immunity
Defendant also argues that it is entitled to Eleventh Amendment immunity because
the state would be entitled to immunity, and Defendant acts as an arm of the state.
Specifically, Defendant contends that a majority of its service center transactions involve
state transactions, such as licensing and motor vehicle transactions, and that its financial
relationship with the state is defined by statute and administrative rule. As such,
Defendant maintains that it is a conduit to the state treasury and should be recognized as a
state actor entitled to Eleventh Amendment immunity.
Plaintiff points out that the primary factor in determining whether a county may
claim Eleventh Amendment immunity is whether the state will pay the judgment or any
penalties assessed. See Greenwood v. Ross, 778 F.2d 448, 453 (8th Cir. 1985). The
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After the hearing on this matter, Defendant provided the Court with recently
released authority, including Stellick v. U.S. Dep’t of Educ., Civ. No. 11-730, 2013 WL
673856 (D. Minn. Feb. 25, 2013). In Stellick, the court dismissed claims brought against
the Department of Education (“DOE”) under the FCRA, concluding that “nothing in the
FCRA waives the sovereign immunity of the DOE.” Id. at *5. The issue of sovereign
immunity for damages brought under the FCRA is not relevant to the present suit, which
was brought against Hennepin County, not the United States.
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record is not yet adequately developed so as to allow the Court to determine whether this
suit is actually a suit against the state, and in particular, whether funds to pay any award
in this action will come from the state treasury. As such, the Court declines to hold that
Defendant is entitled to immunity on Eleventh Amendment grounds.
CONCLUSION
Because the Court concludes Plaintiffs’ allegations are sufficient to plausibly state
a claim for a willful violation of FACTA’s redaction requirements, the Court denies
Defendant’s motion. The Court notes, however, that it appears that damages for
Plaintiffs in this case, should they ultimately prevail, will be minimal.
ORDER
Based upon the foregoing, IT IS HEREBY ORDERED that Defendants’ Motion
for Judgment on the Pleadings (Doc. No. [41]) is DENIED.
Dated: May 13, 2013
s/Donovan W. Frank
DONOVAN W. FRANK
United States District Judge
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